China ranks first in electricity generation in the world. Why can't it be used for mining Bitcoin?

Source: Lawyer Liu Honglin

I never really understood electricity

During the "May Day" holiday, I drove across the Hexi Corridor, from Wuwei to Zhangye, Jiuquan, and then to Dunhuang. As I drove on the Gobi highway, I often saw clusters of wind turbines standing silently on the Gobi, which was quite spectacular, resembling a sci-fi version of the Great Wall.

*Image source from the internet

The Great Wall from a thousand years ago guarded the borders and territory, while today, these wind turbines and photovoltaic arrays guard a country's energy security and are the lifeblood of the next-generation industrial system. Sunlight and wind have never been so systematically organized, embedded in national strategy, and become part of sovereign capabilities as they are today.

In the Web3 industry, everyone knows that mining is one of the most fundamental aspects, serving as one of the earliest and most solid infrastructures of this ecosystem. Behind every cycle of bull and bear markets, and every on-chain prosperity, the sound of mining machines running continuously is indispensable. Whenever we talk about mining, the most discussed topics are the performance of mining machines and electricity prices—whether mining can be profitable, whether electricity prices are high, and where to find low-cost electricity.

However, when I saw this endless electric power road, I suddenly realized that I do not understand electricity at all: where does it come from? Who can generate electricity? How is it transmitted from the desert to thousands of miles away, who uses it, and how should it be priced?

This is my cognitive gap, and perhaps there are partners who are equally curious about these issues. Therefore, I plan to use this article to do some systematic make-up lessons, re-understanding one kilowatt-hour, from China's power generation mechanism, grid structure, electricity trading, to the terminal access mechanism.

Of course, this is the first time Lawyer Honglin is encountering this completely unfamiliar topic and industry, and there will inevitably be shortcomings and omissions, so I ask my partners to provide valuable suggestions.

How much electricity does China actually have?

Let's first take a look at a macro fact: According to data released by the National Energy Administration in the first quarter of 2025, China's total electricity generation for the year 2024 is projected to reach 9.4181 trillion kilowatt-hours, an increase of 4.6% year-on-year, accounting for about one-third of global electricity generation. What does this mean? The total annual electricity generation of the entire European Union is less than 70% of China's. This indicates that not only do we have electricity, but we are also in a dual state of "power surplus" and "structural restructuring."

China not only generates a lot of electricity, but the way it generates electricity has also changed.

By the end of 2024, the total installed capacity nationwide will reach 3.53 billion kilowatts, a year-on-year increase of 14.6%, with the proportion of clean energy further rising. The newly installed photovoltaic capacity is about 140 million kilowatts, and the newly installed wind power capacity is 77 million kilowatts. In terms of proportions, in 2024, China's newly installed photovoltaic capacity accounts for 52% of the global total, while the newly installed wind power capacity accounts for 41%. In the global clean energy landscape, China is almost a 'dominant player'.

This growth is no longer concentrated solely in traditional energy strongholds but is gradually shifting towards the northwest. Provinces such as Gansu, Xinjiang, Ningxia, and Qinghai have become "major provinces for new energy" and are gradually transforming from "resource exporters" to "main energy producers." To support this transformation, China has deployed a national-level new energy base plan in the "Shagohuang" region: concentrating over 400 million kilowatts of wind and solar power installations in desert, gobi, and barren areas, with the first batch of about 120 million kilowatts already included in the "14th Five-Year Plan" special program.

*The first solar thermal power station in Asia, the Dunhuang First Flight 100 MW molten salt tower power station (Image source: Internet)

At the same time, traditional coal power has not completely withdrawn, but is gradually transforming into peak regulation and flexible power sources. Data from the National Energy Administration shows that in 2024, the installed capacity of coal power nationwide will grow by less than 2% year-on-year, while the growth rates of photovoltaic and wind power will reach 37% and 21%, respectively. This indicates that a pattern of "coal-based, green-oriented" is beginning to take shape.

From a spatial structural perspective, the overall balance of energy and power supply and demand in the country in 2024 is expected, but there are still structural surpluses in certain regions. In particular, there are times in the northwest region where there is "too much electricity that cannot be used," which also provides a practical background for our discussion on whether "Bitcoin mining is a way to export power redundancy."

In summary, what China lacks is not electricity, but rather "dispatchable electricity," "absorptive electricity," and "profitable electricity."

Who can send electricity?

In China, generating electricity is not something you can just do if you want; it does not belong to a purely market-oriented industry, but rather resembles a "franchise" with policy entry points and regulatory ceilings.

According to the "Regulations on the Management of Electric Power Business Licenses", all units intending to engage in power generation must obtain the "Electric Power Business License (Generation Type)". The approval authority is usually the National Energy Administration or its dispatched agencies, depending on the scale of the project, region, and technical type. The application process often involves multiple cross-evaluations:

• Does it comply with national and local energy development plans?
• Have the land use, environmental impact assessment, and water conservation approvals been obtained?
• Are there conditions for grid access and absorption space?
• Is the technology compliant, is the funding in place, and is it safe and reliable?

This means that in terms of "power generation," administrative power, energy structure, and market efficiency are all simultaneously involved in the game.

Currently, the main power generation entities in China can be roughly divided into three categories:

The first category includes the five major power generation groups: State Energy Group, Huaneng Group, Datang Group, Huadian Group, and State Power Investment Corporation. These companies control over 60% of the centralized thermal power resources in the country and are also actively investing in the new energy sector. For example, State Energy Group is expected to add more than 11 million kilowatts of wind power capacity in 2024, maintaining its leading position in the industry.

The second category is local state-owned enterprises: such as China Three Gorges New Energy, Beijing Energy Holding, and Shaanxi Investment Group. These enterprises are often tied to local governments and play an important role in local power planning, while also undertaking certain "policy-related tasks."

The third category is private and mixed-ownership enterprises: typical representatives include Longi Green Energy, Sungrow Power Supply, Tongwei Co., Ltd., and Trina Solar. These companies show strong competitiveness in sectors such as photovoltaic manufacturing, energy storage integration, and distributed generation, and have also obtained "priority rights" in certain provinces.

However, even if you are a leading new energy enterprise, it does not mean that you can "build a power plant whenever you want." The bottlenecks here usually appear in three aspects:

1. Project Indicators

Power generation projects need to be included in the annual local energy development plan and must obtain indicators for wind and solar projects. The allocation of these indicators is essentially a form of local resource control—without the approval of the local development and reform commission and energy bureau, it is impossible to legally initiate a project. Some regions also adopt a "competitive allocation" method, scoring based on land conservation, equipment efficiency, energy storage configuration, funding sources, etc., to select the best.

2. Grid Access

After the project is approved, it is necessary to apply to the State Grid or the Southern Grid for system access evaluation. If the local substation's capacity is full, or there are no transmission channels, then the project you built is of no use. This is especially true in regions like the northwest where renewable energy is concentrated, making access and scheduling difficult.

3. Absorption Capacity

Even if the project is approved and the lines are available, if the local load is insufficient and the cross-regional channels are not opened, your electricity may still be "unused by anyone." This leads to the problem of "abandoning wind and solar energy." The National Energy Administration pointed out in its 2024 report that some cities have even had their new energy project connections suspended due to an excessive load from concentrated projects.

Therefore, whether or not "power generation" is not only a matter of the capabilities of enterprises, but also a result jointly determined by policy indicators, the physical structure of the power grid, and market expectations. In this context, some enterprises have begun to shift towards new models such as "distributed photovoltaics", "self-supply in parks", and "industrial and commercial energy storage coupling" to avoid centralized approval and consumption bottlenecks.

From the perspective of industry practice, this three-layer structure of "policy access + engineering threshold + scheduling negotiation" determines that China's power generation industry still belongs to a "structural access market". It does not inherently exclude private capital, but it is also difficult to allow purely market-driven operations.

How is electricity transported?

In the energy sector, there is a widely circulated "power paradox": resources are in the west, while electricity consumption is in the east; electricity is generated, but cannot be delivered.

This is a typical problem in China's energy structure: the northwest has abundant sunlight and wind, but low population density and small industrial load; the eastern part is economically developed and has high electricity consumption, but local renewable energy resources that can be developed are very limited.

What should we do then? The answer is: to build ultra-high voltage transmission (UHV) and use "power highways" to transport wind and solar energy from the west to the east.

By the end of 2024, China will have put into operation 38 ultra-high voltage lines, including 18 AC lines and 20 DC lines. Among these, the DC transmission projects are particularly crucial, as they enable low-loss, large-capacity directional transmission over extremely long distances. For example:

• "Qinghai-Henan" ±800kV DC line: stretches 1587 kilometers, transmitting electricity from the photovoltaic base in the Qinghai Chaidamu Basin to the Central Plains urban agglomeration;
• "Changji–Guquan" ±1100kV DC line: stretches 3293 kilometers, setting dual records for transmission distance and voltage level globally;
• "Shanbei-Wuhan" ±800kV DC line: Serves the Shanbei energy base and the industrial heartland of Central China, with an annual transmission capacity exceeding 66 billion kilowatt-hours.

Each ultra-high voltage line is a "national-level project," uniformly approved by the National Development and Reform Commission and the Energy Administration, with investment and construction managed by the State Grid or the Southern Power Grid. These projects often require investments of hundreds of billions, with a construction period of 2 to 4 years, and usually necessitate inter-provincial coordination, environmental assessments, and cooperation for land acquisition and resettlement.

So why do we need to develop ultra-high voltage? In fact, behind it is a resource redistribution issue:

1. Space resource redistribution

China's scenic resources and its population and industry are severely misaligned. If the spatial differences cannot be bridged through efficient electricity transmission, all the slogans of "West-to-East Power Transmission" are mere empty talk. UHV (Ultra High Voltage) is about replacing "resource endowments" with "transmission capacity."

2. Electricity Price Balancing Mechanism

Due to the significant differences in electricity price structures between the resource end and the consumption end, ultra-high voltage transmission has also become a tool for adjusting regional electricity price differences. The central and eastern regions can obtain relatively low-priced green electricity, while the western regions can realize energy monetization benefits.

3. Promote the consumption of new energy

Without transmission channels, the northwest region is prone to a situation where "excess electricity cannot be used" due to wasted wind and solar energy. Around 2020, the electricity abandonment rate in Gansu, Qinghai, and Xinjiang once exceeded 20%. After the completion of the ultra-high voltage transmission lines, these numbers have dropped to below 3%, which is structurally alleviated by the enhancement of transmission capacity.

At the national level, it has been made clear that ultra-high voltage is not just a technical issue, but an important pillar of the national energy security strategy. In the next five years, China will continue to lay out dozens of ultra-high voltage lines in the "14th Five-Year Plan for Power Development", including key projects such as Inner Mongolia to Beijing-Tianjin-Hebei and Ningxia to the Yangtze River Delta, further achieving the unified scheduling goal of a "national grid".

However, it is important to note that while ultra-high voltage is good, there are two long-term points of contention:

• High investment and slow return: An ±800kV DC line often requires an investment of over 20 billion yuan, with a payback period exceeding 10 years;
• Inter-provincial coordination difficulties: UHV (Ultra High Voltage) needs to cross multiple administrative regions, which puts high demands on the coordination mechanism between local governments.

These two questions determine that UHV is still a "national project" rather than a market infrastructure based on corporate free decision-making. However, it is undeniable that in the context of the rapid expansion of new energy and the exacerbation of regional structural mismatches, ultra-high voltage is no longer an "optional choice," but a necessary option for the "Chinese version of the energy internet."

How is electricity sold?

After sending out the electricity, the next core question is: how to sell the electricity? Who will buy it? How much is it per kilowatt?

This is also a core aspect that determines whether a power generation project is profitable. In a traditional planned economy system, this issue is very simple: power plants generate electricity → sold to the state grid → the state grid schedules uniformly → users pay electricity bills, everything is priced by the state.

However, this model has completely failed after the large-scale integration of new energy sources. The marginal costs of solar and wind power are nearly zero, but their output is characterized by volatility and intermittency, making them unsuitable for fixed electricity pricing and rigid supply-demand power planning systems. Therefore, the question has shifted from "Can it be sold?" to a matter of life and death for the new energy industry.

According to the new regulations that will come into effect in 2025, all new renewable energy power generation projects across the country will completely abolish fixed electricity price subsidies and must participate in market-oriented trading, including:

• Medium to long-term contract trading: similar to "pre-sale electricity", power generation companies directly sign contracts with electricity consumers to lock in a certain period, price, and electricity volume;
• Spot market trading: Electricity prices may change every 15 minutes based on real-time fluctuations in supply and demand.
• Ancillary Services Market: Provides frequency regulation, voltage regulation, reserves, and other grid stability services;
• Green Power Trading: Users voluntarily purchase green power, accompanied by Green Power Certificates (GEC);
• Carbon market trading: Power generation companies can earn additional revenue by reducing carbon emissions.

Currently, multiple electricity trading centers have been established across the country, such as the electricity trading center companies in Beijing, Guangzhou, Hangzhou, and Xi'an, which are responsible for market matchmaking, power quantity confirmation, and electricity price settlement.

Let's take a look at an example of a typical spot market:

During the extreme heat period in the summer of 2024, the Guangdong electricity spot market experienced extreme fluctuations, with off-peak electricity prices dropping to 0.12 yuan/kWh and peak prices reaching as high as 1.21 yuan/kWh. Under this mechanism, if renewable energy projects can be flexibly scheduled (such as with energy storage), they can "store electricity at low prices and sell electricity at high prices," gaining substantial price differential profits.

In contrast, projects that still rely on medium to long-term contracts but lack peak shaving capability can only sell electricity at a price of about 0.3-0.4 yuan per kilowatt-hour, and in some cases, are forced to go online at zero price during certain periods of abandoned electricity.

As a result, more and more new energy companies are starting to invest in supporting energy storage, on one hand for grid dispatch response, and on the other hand for price arbitrage.

In addition to electricity price revenue, new energy companies have several other possible sources of income:

1. Green Electricity Certificate (GEC) trading. In 2024, provinces and cities such as Jiangsu, Guangdong, and Beijing have launched GEC trading platforms, where users (especially large industrial enterprises) purchase GEC for purposes such as carbon disclosure and green procurement. According to data from the Energy Research Association, the trading price range for GEC in 2024 is 80-130 yuan per MWh, equivalent to about 0.08-0.13 yuan/kWh, which is a significant supplement to traditional electricity prices.

2. Carbon market trading. If new energy projects are used to replace coal power and are included in the national carbon emissions trading system, they can obtain "carbon asset" benefits. By the end of 2024, the national carbon market price is expected to be around 70 yuan/ton CO₂, with each kilowatt-hour of green electricity reducing emissions by approximately 0.8-1.2 kilograms, resulting in a theoretical benefit of about 0.05 yuan/kWh.

3. Peak and Valley Electricity Price Adjustment and Demand Response Incentives. Power generation companies sign electricity adjustment agreements with high-energy-consuming users, allowing them to reduce load during peak periods or feed electricity back into the grid, which can earn them additional subsidies. This mechanism has been advancing quickly in pilot programs in Shandong, Zhejiang, Guangdong, and other regions.

Under this mechanism, the profitability of new energy projects no longer depends on "how much electricity I can generate", but rather:

• Can I sell it for a good price?
• Do I have any long-term buyers?
• Can I flatten the peaks and fill the valleys?
• Do I have energy storage or other adjustment capabilities?
• Do I have any tradable green assets?

The previous model of "snatching indicators and relying on subsidies" has come to an end. In the future, new energy companies must possess financial thinking and market operation capabilities, and even manage electric power assets with the same precision as derivative products.

In summary, the "selling electricity" segment of new energy is no longer a simple buying and selling relationship, but rather a system engineering that uses electricity as a medium and involves coordinated games with policies, markets, carbon rights, and finance.

Why is there abandoned electricity?

For power generation projects, the biggest risk has never been whether the power station can be built, but rather "whether it can be sold after completion." And "abandoned electricity" is the most silent yet deadly enemy in this process.

The so-called "abandoned electricity" does not mean that you do not generate electricity, but rather that the electricity you produce has no users, no channels, and no scheduling flexibility, resulting in it being wasted in vain. For a wind power or photovoltaic company, abandoning electricity not only means a direct loss of revenue, but may also affect subsidy applications, electricity accounting, green certificate generation, and even impact subsequent bank ratings and asset revaluation.

According to statistics from the Northwest Regulatory Bureau of the National Energy Administration, the wind power curtailment rate in Xinjiang reached as high as 16.2% in 2020, while photovoltaic projects in Gansu, Qinghai, and other regions also experienced curtailment rates of over 20%. Although by the end of 2024, these figures have dropped to 2.9% and 2.6% respectively, curtailment remains an unavoidable reality for project operators in certain areas and time periods—especially in typical scenarios of high solar radiation and low load during midday, where a large amount of photovoltaic electricity is "pressed" by the dispatching system, rendering it essentially wasted.

Many people may think that abandoning electricity is because of "insufficient electricity usage," but essentially it is a result of an imbalance in system scheduling.

First, there is a physical bottleneck: in some resource concentration areas, the capacity of substations has already reached saturation, and the grid connection has become the biggest limitation. Projects can be approved but cannot be connected to the grid. Secondly, the scheduling mechanism is rigid. China still relies on the stability of thermal power units as the core of scheduling, and the uncertainty of new energy output causes scheduling units to habitually "limit access" to avoid system fluctuations. Additionally, the delay in inter-provincial consumption coordination leads to many instances where, although theoretically "there are buyers," power cannot be "delivered out" due to administrative processes and inter-provincial channels, ultimately resulting in abandonment. On the market level, there is another set of lagging rule systems: the spot electricity market is still in its early stages, the auxiliary service mechanism and price signal system are far from perfect, and energy storage regulation and demand response mechanisms have not yet formed at scale in most provinces.

In fact, there has been a response at the policy level.

Since 2021, the National Energy Administration has included "new energy consumption capacity assessment" as a prerequisite for project approval, requiring local governments to clarify local "carrying capacity indicators". Moreover, multiple policies during the "14th Five-Year Plan" have proposed promoting the integration of source, grid, load, and storage, establishing local load centers, improving the spot market trading mechanism, and mandating the allocation of energy storage systems to smooth peaks and fill valleys. At the same time, many local governments have introduced a "minimum consumption ratio" responsibility system, specifying that the average annual utilization hours of new energy grid-connected projects must not be lower than the national baseline, compelling project parties to consider regulatory measures in advance. Although these measures are on the right track, there is still a significant lag in execution progress—many cities experiencing a surge in new energy installations still face common issues such as lagging grid upgrades, slow energy storage installation, and unclear regional dispatch authority, leading to a mismatch between institutional promotion and market cooperation.

More importantly, the issue behind the abandonment of electricity is not simply "economic inefficiency," but a conflict of resource space and institutional structure. The northwest has abundant electricity resources, but their development value relies on inter-provincial and inter-regional power grid transmission and scheduling systems, while China's current administrative divisions and market boundaries are highly fragmented. This results in a large amount of "technically available" electricity being institutionally displaced, becoming a form of passive redundancy.

Why can't electricity in China be used for cryptocurrency mining?

While a large amount of "technically available but institutionally unplaceable" electricity is being wasted, a previously marginalized electricity consumption scenario—cryptocurrency mining—has emerged in recent years in an underground and guerrilla-style manner, and has regained a "structurally needed" position in certain regions.

This is not a coincidence, but a natural product of some structural gap. Cryptocurrency mining, as a high power consumption and low continuous disturbance instant computing power activity, operates logically in natural compatibility with abandoned wind and solar power generation projects. Mining sites do not require stable scheduling guarantees, do not demand grid interconnection, and can even actively cooperate with scheduling to smooth out peaks and valleys. More importantly, it can convert unwanted electricity into on-chain assets outside of the market, thus forming a pathway for "redundant monetization."

From a purely technical perspective, this is an improvement in energy efficiency; however, from a policy perspective, it remains in an awkward position.

The mainland Chinese government halted mining in 2021, with the core consideration not being the electricity itself, but rather the financial risks and industrial orientation behind it. The former concerns the opacity of the path of crypto assets, which can easily lead to regulatory issues such as illegal fundraising and cross-border arbitrage; the latter involves the industrial evaluation of "high energy consumption and low output," which does not align with the current strategic theme of energy conservation and carbon reduction.

In other words, whether mining is considered "reasonable load" does not depend on whether it consumes excess electricity, but rather on whether it is included in the "acceptable structure" of the policy context. If it continues to exist in an opaque, non-compliant, and uncontrollable manner, it can only be classified as a "grey load"; however, if it can be restricted to specific areas, specific power sources, specific electricity prices, and specific on-chain purposes, and designed as a special energy export mechanism within a compliant framework, it may still become part of the policy.

This redesign is not without precedent. Internationally, countries such as Kazakhstan, Iran, and Georgia have already incorporated "computing power load" into their electricity balance systems, and even guided mining farms to bring in digital assets like USDT or USDC through the method of "electricity for stablecoins" as a source to replace foreign exchange reserves. In the energy structure of these countries, mining has been redefined as a "strategic adjustable load," serving both the adjustment of the power grid and the reconstruction of the monetary system.

In China, although it is impossible to emulate such radical methods, is it possible to partially, limitedly, and conditionally restore the existence rights of mining sites? Especially during a phase where the pressure of abandoned electricity continues and green power cannot be fully marketized in the short term, using mining sites as a transitional mechanism for energy absorption and treating Bitcoin as an on-chain asset reserve for closed-loop allocation may be more realistic than a blanket ban and could better serve the country's long-term digital asset strategy.

This is not only a reevaluation of mining but also a redefinition of the "value boundary of electricity."

In the traditional system, the value of electricity depends on who buys it and how it is bought; whereas in the on-chain world, the value of electricity may directly correspond to a segment of computing power, an asset, or a pathway to participate in the global market. As countries gradually build AI computing power infrastructure, promote the East Data West Computing project, and establish a digital renminbi system, should there also be a policy blueprint that reserves a technology-neutral and compliant channel for a "on-chain energy monetization mechanism"?

Bitcoin mining may be the first practical scenario in China where energy is converted into digital assets without intermediaries – this issue is sensitive, complex, and yet unavoidable.

Conclusion: The Ownership of Electricity is a Real-World Multiple-Choice Question

China's power system is not behind. Wind energy covers the Gobi Desert, sunlight shines on the sand dunes, and ultra-high voltage lines traverse thousands of miles of wilderness, delivering electricity from the frontier to the skyscrapers and data centers of eastern cities.

In the digital age, electricity is no longer just a fuel for lighting and industry; it is becoming the infrastructure for value calculation, the roots of data sovereignty, and the most significant variable in the reorganization of the new financial order. Understanding the flow of "electricity" is, to some extent, understanding how the system sets qualification boundaries. The point where one kilowatt-hour lands is never naturally determined by the market; it hides countless decisions behind it. Electricity is not distributed evenly; it always flows towards those who are permitted, towards recognized scenarios, and towards accepted narratives.

The core of the controversy surrounding Bitcoin mining has never been about whether it consumes electricity, but rather whether we are willing to acknowledge it as a "legitimate existence"—a use case that can be incorporated into national energy scheduling. As long as it is not recognized, it can only operate in the gray area and function in the cracks; but once it is recognized, it must be institutionally placed—there will be boundaries, conditions, the right to explain, and regulatory standards.

This is not about the loosening or blocking of an industry, but rather an attitude issue of a system towards "unconventional loads."

And we are standing at this fork in the road, watching this choice quietly unfold.

Reference Material

[1] State Council of the People's Republic of China, "2024 National Power Industry Statistical Data", January 2025.

[2] IEA, "Renewables 2024 Global Report", January 2025.

[3] National Energy Administration, "2024 Annual Energy Operation Report" Appendix.

[4] National Development and Reform Commission Energy Research Institute, "Progress of the "Shagehuang" Wind and Solar Base Construction", December 2024.

[5] National Development and Reform Commission, "Interim Measures for the Management of Renewable Energy Power Generation Projects", 2023.

[6] Reuters, "Assessment Report on China's UHV Transmission System", May 2025.

[7] Infolink Group, "Analysis of the Cancellation of Fixed Price Subsidies for China's New Energy", March 2025.

[8] National Electric Power Dispatching Center, "North China Electric Power Spot Market Operation Bulletin (2024)."

[9] REDex Insight, "China's Unified Electricity Market Roadmap", December 2024.

[10] China Electricity Council, "2024 Power Industry Report" Appendix.

[11] National Energy Administration Northwest Regulatory Bureau, "Northwest Wind and Solar Abandonment Situation Report", December 2024.

[12] Energy Research Association, "Green Power Certificate Trading Pilot Observation Report", January 2025.

[13] CoinDesk, "Analysis of Kazakhstan's Mining Policy Adjustments", December 2023.